The encouraging employment data revived hopes that the US may well be on the road to recovery from the coronavirus shock. Leisure and hospitality (including restaurants) represented almost half of the jobs gained clawing back 1.2m jobs after losing more than 8m since the crisis began. Employment looks set to continue rebounding in June, although it is likely to be a long time before the labour market is anywhere near back to its pre-virus state (the U.S. economy has shed over 19.6 million jobs over the last three months). The jobless rate declined to 13.3% from April’s record level of 14.7%. The U.S. unemployment rate is still projected to end the year at around 10%.
Protests against racism were widespread across major U.S. cities with ten of thousands of people marching in Washington DC over the weekend. Many curfews imposed on several U.S. cities after initial unrest have now been lifted.
The European Central Bank (“ECB”) increased its pandemic emergency purchase program by EUR 600 billion to EUR 1.35 trillion. The ECB kept its key interest rates unchanged and said it continues to stand ready to adjust all its instruments, as appropriate. Eurozone inflation slowed to a four-year low of 0.1% in May, from 0.3% in April, as energy prices tumbled.
The final round of talks between the UK and the European Union (EU) on a post-Brexit trade relationship ended with both sides making “no real progress” on an agreement. Failure to strike an accord by Dec. 31 would mean the return of tariffs and quotas between the U.K. and the eurozone.
Global stock markets continued to recover much of their losses since March lows, buoyed by signs of a sharper economic recovery. The S&P500 closed the week up 4.9% with the Nasdaq now almost 10% positive year to date. Shares in Europe also surged as lockdown restrictions were eased and the ECB injected fresh stimulus into the Eurozone. The pan-European STOXX Europe 50 index ended the week 11% higher while the UK’s FTSE 100 Index added 6.7%.
Market Moves of the Week
South Africa's confirmed Covid-19 cases now stand at 45 973, with 44 more deaths reported on Saturday bring the national death toll to 952. There was an increase of 2539 cases with the Western Cape remaining the epicentre of the virus in the country. Various models are forecasting infections to peak in mid-July to early August.
The JSE all share gained over 8% this week and is now down just 4% in 2020. Financials gained 17.8% as banks rebounded strongly over the week. The rand also firmed strongly over the week to close at R16.86/$ and R21.35/£ with the local currency breaking through R17/$ for the first time in more than two months.
The Reserve Bank purchased R 10.2bn in government bonds in May, adding liquidity to the local bond market.
Chart of the Week
Wall Street economists were forecasting for a loss of around 8 million jobs, the month actually saw a gain of 2.5 million jobs with the unemployment rate defying analyst forecasts declining to 13.3% from a high of 14.7% in April.
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